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Managing Company Ethics and Social Responsibility Essay

L’Oreal is the world’s top cosmetic products manufacturer. In 1907, it was founded by Eugène Schueller, a young chemist who developed a hair dye formula which was safe for people. He named the products as “Aurelióne” and offered to the hair salons in Paris. Within 2 years, he registered his own company as “La Societe Franeaise des Teintures inoffensives pour Cheveux”, which soon became L’Oreal.

In 1920, the company employed 3 chemists in the laboratory. At the end of the year, there were 40000 hair salons in France and L’Oreal new products which are O’Cap, Imédia Liquide, and Coloral gained the most market share. In 1928, L’Oreal developed its diversification strategy by purchasing the soap company Monsavon.

L’Oreal started its business with hair dye products. In 1954, L’Oreal expanded its market into skin care field by entering into technological agreements with company Vichy. In 1960s, there was a rapid growing interest in simulating youthful looks. Therefore the company opened new cosmetological and bacteriological facilities to gain a significant entry into skin care, makeup and perfume markets. Companies such as Garnier and André Courrèges were added into the group.

In 1993, L’Oreal was facing some ethics problems. The animal right activists were about to protest about the use of animal testing that was doing by L’Oreal. As a top manufacturer of cosmetic products, L’Oreal intended to maintain its good reputation and image by ending the activity of animal testing. In 2006, L’Oreal purchased the Body Shop and the consumers were making calls to boycott The Body Shop since the rumour of using animal testing of L’Oreal were stated. In 2011, L’Oreal will have the largest factory in Indonesia by investing US$50 million.

Nowadays, the company markets over 500 brands and has more than 2,000 products in every category in the beauty business. From hair colour products, the company expanded its product lines to permanents, styling aids, cleaners, perfumes and body cosmetics. Those products were distributed through different distribution channels, from hair salons and perfumeries to hypermarkets, supermarkets, and health and beauty outlets. They also distributed their products through direct mails and promoted the products hardly via advertising.

Communication with the consumers played an important role in L’Oreal’s history. L’Oreal won the Oscar in advertising award in 1953. To promote its products, L’Oreal commissioned the promotional posters from graphic artists such as Colin and Loupot. The founder also launched his own women’s magazine, Votre Beauté in 1933.

L’Oreal’s five ethical values are integrity, respect, excellent, courage, transparent and currency. Those ethical values play important role in shaping L’Oreal’s culture and built its reputation and give them a shared vision. L’Oreal sees the importance of ethics and presents the five ethical values in all aspect of their activities, such as their strong Sustainable Development and Diversity policies, Purchasing Department’s responsible sourcing policy and their high standard of product quality and safety.

According to L’Oreal’s official website (www.loreal.com), ethics is everyone’s job that two ethical competencies that have been integrated into their annual appraisal process, which are “Leads with human sensitivity” and “Achieve results with integrity”. In order to implement The L’Oreal Spirit in employees’ day-to day activities, L’Oreal has conducted The Code of Business Ethics in 2000. To highlight the importance of this document, L’Oreal’s Chairman and Chief Executive Officer signed the foreword and the Executive Committee signed the introduction. Each employee also receives a copy of this document to apply in their day-to day activities.

CONTENTS Corporate Social Responsibility (CSR) refers to the fact that board of directors of a company, as the trustees of various interest parties that actively participate in altruist activities in order to perform their due corporate roles in the society according to Liu Jun Hai, (1999); for those profit-oriented companies, when their decision making bodies become certain that some undertakings are mostly desired by the majority of the society should give up their intent of making profits from the undertakings and try to meet the expectations of the majority according to Liu Lian Yu (1999) ; the fact that companies shall not take optimal-profit-making for directors as the sole aim of corporate existence. Instead, all social benefits rather than maximally improving shareholders’ interests should be considered as the sole objective of corporate existence according to Liu Jun Hai, (1999) ; the social obligation that a company has to be liable to in the maintenance and improvement of social benefits in addition to the pursuit of maximizing shareholders profits was according to Lu Dai Fu (2002) ; even though the description of CSR varies, the core of it is similar, i.e. a company should undertake certain social responsibilities and liabilities at the same time of making profits for the company.

CSR is an integration of legal and moral obligations of a company. Legal obligation, a statutory liability taking state coercive forces as its performance guarantee, means legal security of minimum requirement of morality necessary to maintain basic social order. Moral obligation is a responsibility non-legalized and voluntarily performed by the obligors and which takes any other means than the state coercive forces as its performing guarantee. It is a higher demand of morality on people above their legal obligations. CSR, as an obligation that a company is liable to the society, is not simply a legal obligation or a moral obligation. Rather, it is the integration of the two.

CSR is also an amendment and complement to the conventional principle of maximized profits for shareholders. The conventional companies and company laws take individual principals (shareholders) as the starting point for consideration, believing that the highest or the sole objective of a company is to achieve profits in order to maximize the profits for shareholders whereas CSR takes social principals as its starting point, believing that the objective of a company should be of two dimensions. In addition to realizing the maximum profits for shareholders, companies should also strive to maintain and upgrade social benefits. Any single one of the objectives will have to be put under restriction by the other of the two corporate objectives to achieve maximum corporate profits and social benefits. Therefore, the objectives of making profits and of bringing social benefits are often found in strong tension. Their respective objectives of maximization are realized under conditions of reciprocal interactions and a balance in corporate objectives has also been maintained. Obviously, CSR is an amendment and complement to the conventional principle of maximized profits for shareholders. And this amendment and complement does not reject the principle of maximizing profits for shareholders according to Lu Dai Fu (2002).

L’Oreal aspires to beauty to everyone. Helping men and women around the world realise that aspiration and express their individual personalities and gain self-confidence to the full is their main mission. There are some of missions from L’Oreal are its unique Research arm enables it to continually explore new territories and invent the products of the future and also provide access to products that enhance well-being, mobilising its innovative strength to preserve the beauty of the planet and supporting local communities which means beauty is commitment which are exacting challenges which are a source of inspiration and creativity for L’Oreal. This commitment has been reflected in innovation that caters for the world’s diversity and adheres to eco-friendly design principles without compromising consumer safety. Mission is an essential purpose that differentiates one company from others that gives so much meanings and values to their business and to the working lives of the employees and they are proud of their works.

L’Oreal’s strategy for leadership which is the process of leading a group and influencing that group to achieve its goals (Robbins, DeCenzo, and Coulter, 8th edition) that is based on continuous investment in rigorous scientific research and development as a business. This enables their brands to deliver products which are innovative which is the process of taking a creative idea and turning it into useful product, service, or method of operation (Robbins, DeCenzo, and Coulter, 8th edition), highly effective which means doing right things, or completing activities so that organisational goals are attained (Robbins, DeCenzo, and Coulter, 8th edition), practical and pleasant to use, and which are manufactured to the most demanding standards of quality and safety. They also constantly challenge themselves and their methods by aiming excellence. L’Oreal’s research work is taking its investments onto new scientific and technological ground. In the field of biology for example, the genomics explosion, progress in stem cell research and intensive use of multiple reconstructed skin models are giving us a clearer understanding of the diversity of the aging mechanisms at play in different ethnic skin and hair types, while enabling us to identify new cellular and molecular targets and to predict effects more quickly and accurately.

They place great value on honesty and clarity: their consumer advertising is based on proven performance and scientific data. They are committed to building strong and lasting relationships with their customers and suppliers, founded on trust which is belief in the integrity, character, and ability of a leader and mutual benefit. Followers who trust a leader are willing to be vulnerable to the leader’s actions as they are confident that their rights and interests will not be abused. (Robbins, DeCenzo, and Coulter, 8th edition) They do business with integrity: they respect the laws of the countries in which they operate and adhere to good corporate governance practices. They maintain high standards in accounting and reporting, and support the fight against corruption. They deliver long-term, sustained shareholder value by protecting and making the most effective use of company assets.

L’Oreal aim to make a great place in which to work as an employer. They know that their employees are their greatest assets. They are entitled to a safe and healthy working environment: one in which personal talent and merit are recognised, diversity is valued, privacy is respected, and the balance between professional and personal life is taken into account. They believe in offering their employees a stimulating environment, exciting personal opportunities and a chance to make a difference. They encourage an atmosphere of openness, courage, generosity and respect, so that all their employees feel free to come forward with their questions, ideas and concerns.

As a responsible corporate citizen, they play their part in creating a world of beauty and fairness. They are mindful of their impact on the natural environment, including biodiversity, and constantly seek to reduce it: they are determined to avoid compromising tomorrow for the sake of today. They make a positive contribution to the countries and communities in which they are present and respect local cultures and sensitivities. They are committed to the respect of human rights. They want to help end the exploitation of children in the workplace and the use of forced labour. They also want an end to animal testing in their industry, and they contribute to the development and acceptance of alternative methods. They actively seek out and favour business partners who share their values and their ethical commitments.

This is the spirit in which L’Oreal operates: the L’ORÉAL SPIRIT.

L’Oreal brands are divided into consumer brands, professional brands, and luxury brands. Consumer brands are L’Oreal Paris, Garnier, Maybelline New York, Softsheen.Carson, CCB Paris, Vichy, La Roche Posay, Innéov, Skinceuticals, Sanoflore, Roger & Gallet. Professional brands are L’Oreal Professional, Kérastase, Redken, Matrix, Mizani, Pureology, and Shu Uemura Art of Hair. Luxury brands are Lancôme, Biotherm, Helena, Rubinstein, Kiehl’s, Shu Uemura, Giorgio Armani, Ralph Lauren, Cacharel, Viktor & Rolf, Diesel, YSL Beauté, and Maison Martin Margiela. While retailer is The Body Shop.

In 2009, L’Oreal published a report on its sustainable practices, which repeated the claim that it does not test finished products on animals. The problem is that as one of the world’s biggest cosmetics firms, much of its work is in the development of new ingredients for its products, and it is here that Naturewatch’s problems arise. EU legislation actually demands that all new cosmetic ingredients be tested on animals, although from 2009 onwards it has been working with cosmetics firms to eradicate the use of animal testing by 2013.

‘L’Oreal has not used animals to test its finished products since 1989, except in the case where national legislation requires it,’ the cosmetics giant said in its sustainability report. ‘This is the case in certain countries where L’Oreal operates and in those locations regulations require testing using animals before substances can be registered for commercial use. As L’Oreal operates on an international scale, it is obliged to comply with the current national legislation for products that are manufactured locally and sold locally.’

L’Oreal argues that it is a world leader in researching alternatives to animal testing, including the development of artificial tissue on which it has spent €600m to date. It is also a founder member of the European Partnership for Alternatives to Animal Testing and closely involved in the international Tox Cast initiative which is run by the US Environmental Protection Agency. Rather than a cruel advocate of animal testing, it is in fact fully engaged In attempting to make the practice obsolete.

The owner of one ethical skincare firm told the Ecologist that companies like L’Oreal do face a tough set of choices; either innovate in order to maintain their market share, or use existing ingredients and allow less ethical competitors to launch new products, or continue developing within the limits of regional legislation. Smaller producers can simply find green or ethical ways to produce established ingredients. Few ethical firms could afford to pay for the necessary research on artificial tissues that L’Oreal has done, he adds – at current exchange rates, €600m is not far off the £652m it paid for The Body Shop in 2007.

If you do decide that L’Oreal and Nestlé are acting in an unethical manner then the next big question is: should brands like The Body Shop or Pureology be punished for the sins of the parent company? The founders of both firms have strong ethical principles, and sold their companies so that their message could reach a wider market, making it a tough choice in both cases. Buying their products may line the pockets of their L’Oreal and Nestlé paymasters, but by buying from The Body Shop, which does not test any of its products on animals, or vegan Pureology, you could also be sending a message to the guys at the top: more of the good ethical products, less of the morally questionable. Given that many big corporations are now spending more and more on big, ethical brands – Coca Cola, for example, now owns the UK’s Innocent, while another US giant, Kraft, has Green and Blacks chocolate – this is a problem which is unlikely to go away for the ethical consumer any time soon.


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